Japan's new phone company may keep US competitors on hold

Tokyo
— Sweeping changes come to Japan's telecommunications market today as the government-owned telephone monopoly becomes a private corporation. Nippon Telegraph and Telephone Public Corporation, since 1952 the sole purveyor of domestic telephone service in Japan, has dropped ``public'' from its name, shed its monopoly status, and flung the door open to competition in its basic telephone market.

The move, occurring within 15 months of the deregulation of telecommunications markets in the United States and Britain, is intended to hasten the development of advanced telecommunications networks throughout Japan. Eventually, the new competition will mean lower long-distance rates for Japan's telephone subscribers.

But in the shorter run, it also gives foreign manufacturers, whose access to the market here has been severely restricted, the opportunity to chisel at Japan's growing worldwide trade surplus in the telecommunications industry.

As approved by the Japanese Diet (parliament) last December, up to 49 percent of NTT's shares will be sold to domestic investors over the next five years. Ultimately, two-thirds of the government-owned stock could be released to the public.

The precise dates of those sales have yet to be announced, partly because of a long-runing dispute between the Minstry of Finance and the Ministry of Posts and Telecommunications over how the resulting proceeds should be spent. While the Finance Ministry would like to see profits from the sale being used to help retire the national debt, the Posts and Telecommmunications Ministry wants the profits to be invested in telecommunications research and related projects.

In the meantime, the new NTT begins life as a private company with considerable resources. It has, for example, assets of $46.8 billion, making it the world's biggest telephone company.

It had previously been restricted from devoting part of that might to the marketing of its own switchboard equipment, facsimile machines, and other ``end use'' telecommunications devices. But under the law that takes effect today, it is free to pit its own equipment against all competitors.

At the same time, other groups are lining up basic carrier services to compete with NTT's efforts. Three have already proposed communications systems that would offer line services on the busy telecommunications traffic between Tokyo and Osaka.

But the actual competition may be some time in coming. Nippon Telecom Kikaku, led by Japan National Railways, may be the first in line as it plans to start communications service early by using some of the railways existing facilities and know-how.

The others have their work cut out for them. Daini Denden (which literally means ``No. 2 telephone company'') proposed a digital information link between Tokyo and Osaka. The consortium of 25 venture firms was formed last year under the leadership of ceramics manufacturer Kyocera Corporation.

Because of cost factors, however, it had to give up its plan for a satellite communication system and settle for second best: NTT will build them a microwave system with a scheduled completion date some time in 1987.

Another group, Teleway Japan K. K., which is backed by the Japan Public Highway Corporation and the Ministry of Construction, may well take even longer to build its system.

NTT itself is not standing still, and analysts here say they expect the company to dominate the Japanese telecommunications market well into the future. Unlike American Telephone and Telegraph, NTT will not be broken into a collection of smaller companies. Instead, it is forging ahead with a $79 billion project to link every corner in Japan by an advanced digital network by the end of the century.

The resulting activity is expected to cause a sharp rise in demand for the fiber optics lines and digital switching systems that form the basis of the new communications networks. By one estimate, the demand for such equipment will top $8 billion by 1987.

Foreign manufacturers -- particularly US firms such as International Business Machines, ATT, McDonnell Douglas, Tymshare, and GTE Telenet -- are laying extensive plans to capture a share of that market.

If they do, analysts say, their actions could go far toward eliminating the lopsided balance of trade that has developed between the US and Japan in telecommunications equipment.

US imports of telecommunications products, spurred by the deregulation of the world's largest telecommunications market with last year's breakup of ATT, jumped 31 percent last year to an estimated $4.2 billion, while exports grew only 6 percent to $3.6 billion.

At the same time, Japan's exports of telecommunications equipment jumped more than 73 percent, while imports from the US actually fell 3.7 percent. As a result, Japan's worldwide trade surplus in this area ran to nearly $12 billion last year.

Foreign companies have charged that Japan's proposed regulations for the newly deregulated telecommunications industry would hobble their efforts to compete with Japanese firms for a share of this market.

The charges helped trigger an intense series of trade negotiations between the US and Japan that ended inconclusively Thursday. The US presented a nine-point demand to relax procedures for foreign companies entering the marketplace.

While Japan made concessions involving application procedures for foreign companies and inspection standards, issues surrounding the registration of corporations that wished to introduce large-scale data communications networks remained unsolved.